J.D. Lewis

This is a tale about greed, fraud and the bogeyman.

Money has a strange way of blinding people; someone who would normally make sound decisions can be led down a dark pathway by money. That simple fact of the human condition is the bread and butter of a con man. If you think about it, greed is a huge part of the American way. To get ahead, to prosper: This is ingrained in all Americans, maybe more than any other culture in the world. That kind of drive to succeed also makes you more vulnerable to those who would cheat you. Dangle the right carrot at the right time and every one of us will try to take a bite.

It’s with that setup that we introduce Karen Maddox, Lonnie and Charlotte Layne, David Howell and J.D. Lewis.

Karen, along with several others who did not wish to be identified in this piece, has suffered huge losses from the criminal fraud of the others mentioned.

This tale of heartbreak and loss is related to a classic Ponzi scheme. A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the individual or organization running the operation. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the high returns requires an ever-increasing flow of money from new investors to sustain the scheme.

Now, that is a clinical definition; the human definition is fraud, lies and deception. The toll is calculated in monstrous greed, criminals and victims. Karen and the others are victims. They are not hapless victims, however, because they chose to fight back.

Their stories vary a little but they are basically the same. All were befriended by local businessman, Lonnie Layne. Layne owned an investment company called Legacy Estates. All of the victims had inheritance money to invest or were managing the affairs of their elderly parents. Layne had found the mastermind of this Ponzi scheme, J.D. Lewis, in an advertisement in a local paper. Lewis placed an ad looking for brokers to help him find investors. Layne, approaching people who trusted him and thought him to be a friend, asked them to invest with J.D. Lewis. He then sent the money to Lewis, who in turn, was supposed to invest it for the women. Claims were made that the money was insured and all investments were legit. A profit of 20 percent was promised. At first, dividends were paid and all looked well with the world. Since the investments were paying, why not invest more? So they did invest more, to the collective total of $2 million. When their resources had been tapped and there was no more money to invest, everything changed. The checks were replaced with excuses, calls went unanswered, stalling tactics were employed and eventually threats were made. There are more parts of this story to tell and many other victims—too many to list. Some victims are local, some in other parts of the state, and, in the case of J.D. Lewis, worldwide.

The story is best told in the words of the victims.

“My mom died in October of 1996. When she died, Dad was lost, because Mom had always handled the finances,” Karen Maddox said. “So, I stepped in to help manage their investments.

“We invested with Wallace Reid, a local investor. Wallace moved to Texas and turned over our trust to Legacy Estates and Lonnie Layne. Lonnie was trained to handle trusts and by doing so, he would know exactly how much money you had and how to move it around. Every time he invested or moved our money he would get a commission or a fee,” said Maddox. “Lonnie was never open with us about his motives. We never knew if he was ever working in our best interest. My dad used to argue with him about moving his money. After I became suspicious of the investments and J.D. Lewis, I called Lonnie and told him, ‘You are either going to tell me on the phone, face to face or in court, what you know about J.D. Lewis.’ He said, ‘I know him, I’ve done business with him before, he’s a good guy.’ I found out that Lonnie was never invested in any of the things he invested us in. Later on Lonnie finally admitted he didn’t know J.D. and he found him in a newspaper ad. His mother was invested in VCDC, (the name of J.D. Lewis’s fraudulent company) but he got her out when he found out it was a Ponzi scheme.”

When asked if she thought Layne was aware what he was doing, Maddox said, “It is my feeling that Lonnie did know it was a Ponzi scheme because he put family in it. He invested them in it, in the beginning, to show future investors how well they did. You pay your family and friends the high returns with the new investors’ (victims) money and then get them out of it. The new investors, like us, never get paid. [The matter of] Lonnie Layne knowing initially that it was a Ponzi scheme is open for debate,” she said, “because it is a common tactic for Ponzi schemers to use family members. They put their family and friends in to get your trust and pay the family high returns off new money and they can show off the paperwork to make the investments look legitimate.

“If he did start out to be honest, at some point he became dishonest. If he did not know from the beginning, once he knew what was going on, then it was all about getting his family out and still collecting fees and commissions from us.” In 2000, J.D. Lewis was fined $30,000 by the Manitoba Securities Commission, Maddox explained. “Lonnie knew that, yet he never told us anything about it. I know that he received $24,000 from J.D. Lewis after he knew the investments were a scam,” she said. “He had promised us that he wouldn’t take any more money until we got our money back.”

When asked what she thought the $24,000 payment Layne received was for, Maddox said, “I think that payment was hush money.”

“I made my last payment in 2003 and Lonnie kept asking for more money, he promised us the rollovers. That’s the way a Ponzi scheme works, you get paid at first and then when the money stops you get promises like, ‘Well, I came through for you before, just send the money, and I will again.’ It became obvious that this wasn’t on the level,” Maddox said, “so we pressured Lewis to return our money. He knew we were about to sue him, so he sent a man named David Howell to do a debt consolidation. He was supposedly a rich friend of Lewis’ and he was going to bail him out of this. But it was all a stall tactic. There were a lot of meetings, with promises of other investments and profits that never happened. We were all hoping that he would be able to help; at that point, hope is all we had left. But as it turned out, [Howell] was a con man too. We think that he conned J.D. Lewis out of a lot of our money also. So basically, he conned the con man,” Maddox said. “It’s a good guess that we might have retrieved some or all of our money if it hadn’t been for Howell.”

So, this story has more than one bogeyman.

“Later on, I received threats, which I think were initiated by Howell, just to see what I would do. I recorded the calls and turned it over to the police. They tracked the guy down that was making the calls and the threats stopped. My parents, my brother and I invested $140,000 in VCDC and got almost none of it back.”

In 2011, Karen Maddox and three others employed local attorney Ken Burger to represent them and filed suit against Lonnie and Charlotte Layne, David Howell and J.D. Lewis. Howell and Lewis did not show up for the court date and the Laynes acted as their own counsel. According to Maddox and the others involved, the trial was a stressful one, with the Laynes grandstanding for sympathy and trying to play the victims themselves.

Ultimately, Maddox and the other victims in the case won a $2 million settlement against the defendants.

Burger characterized Lonnie Layne as a financial predator. He swooped down on people who had experienced a death in their family, people who were grieving. All the investments Lonnie Layne brought to the victims went broke. Layne was also found guilty by the Tennessee Department of Commerce of selling securities without a securities licenses. They revoked his insurance licenses and barred him from ever getting them back.

Although they won a judgment, collection efforts are still ongoing. As of this writing, none of the defendants have paid anything. The Burger Law Firm continues to make attempts to collect the debt, but Lewis is hard man to find. He has offices in New York, but lives in Canada. They have tried to extradite him and so far the efforts have not been successful. There is evidence that he has carried out cons similar to this all over the world. The true depths of his deception and schemes could well eclipse that of Bernie Madoff.

“We are only a drop in the bucket compared to all the people he has conned worldwide,” said Maddox.

Lewis and Howell have been referred to as bogeymen throughout this article, but you won’t find them in your closet or under your bed. They are real, they are still out there and they want to devastate your life, just like they did Karen Maddox’s.

She and the others want you to learn from their mistakes. The emotional impact of all this has been far-reaching and permanent. For some of the victims it caused financial hardships, for some it was even further reaching. As a statement from one of the victims puts it, “Lewis, Layne and Howell stole money that was needed to care for a sick parent, and her health suffered because of it.”

Others have lost money needed to send their children to college and improve their lives. Layne came to them as a friend in times of grief and cheated them out of life savings. As another victim stated, “I am just angry that someone knows that they are doing wrong and still does it.”

Maddox expressed her feelings on the subject this way: “I have two stepsons; this was security for their future. I could have paid off my stepsons’ student loans with that money. I don’t need much for myself, but I would like to be able to help my family. Well, maybe someday it would have been nice to buy a sports car for myself,” she said with a smile. “The real impact is emotional. At first you feel so stupid and violated, I feel like I’ve been beat up and left in a ditch. I feel like someone has come into my life and did something terrible to me and I let it happen. I don’t trust anyone anymore. Don’t make my mistake, do your homework. Don’t feel bad about checking out someone you trust. If they are legit, they won’t care if you check them out. I should have been smarter; I could teach a class on it now.”

So, if this story does nothing else, let it serve as a cautionary tale. As Mr. Burger plainly put it, “If it sounds too good to be true, it probably is.”